"QYLD produces income through a covered call strategy on the NASDAQ 100 index. The fund holds the same tech-heavy stocks as the index-with top positions including NVIDIA ( NASDAQ:NVDA) (9.2%), Apple ( NASDAQ:AAPL) (8.1%), and Microsoft ( NASDAQ:MSFT) (7.3%)-but simultaneously sells call options on these holdings. When investors buy these call options, they pay premiums that become the fund's primary income source. This generates consistent monthly cash flow but caps upside potential when markets rally."
"QYLD's distribution history reveals a troubling pattern. Annual payouts have declined 24% from their 2021 peak of $2.67 per share to approximately $2.04 in 2025. Monthly payments now fluctuate between $0.16 and $0.19, reflecting the volatility-dependent nature of option premium income. When market volatility drops-as it has during recent periods of steady gains-the premiums QYLD can collect shrink accordingly. The mechanics are straightforward: covered call funds cannot grow dividends like traditional dividend stocks."
"More concerning for retirees is QYLD's massive underperformance relative to simply holding the NASDAQ 100. Over the past five years, QYLD returned 44% while the Invesco QQQ Trust ( NASDAQ:QQQ) delivered 100%-a 56 percentage point gap. Even accounting for QYLD's distributions, investors sacrificed more than half the market's gains. The 10-year comparison is starker: QYLD's 131% total return versus QQQ's 447%."
QYLD generates a high yield by holding NASDAQ 100 stocks and selling call options to collect premiums as monthly cash distributions. The fund's payouts have declined about 24% from the 2021 peak, with monthly payments fluctuating between $0.16 and $0.19, reflecting dependence on market volatility. Covered call mechanics cap equity upside and prevent dividend growth like traditional dividend stocks. Over five and ten years, QYLD materially underperformed the NASDAQ 100 benchmark, producing far lower total returns despite distributions, which raises concerns about suitability for retirees seeking both income and long-term capital growth.
Read at 24/7 Wall St.
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